Wired: Study — 45 percent of Bitcoin exchanges end up closing

Technology writer Ian Steadman with Wired in the United Kingdom covered the Bitcoin research of SMU cybersecurity expert Tyler W. Moore, an assistant professor of computer science in the Lyle School of Engineering.

Moore’s research found that online exchanges that trade hard currency for the rapidly emerging cyber money known as Bitcoin have a 45 percent chance of failing — often taking their customers’ money with them.

The finding is from a new computer science study that applied survival analysis to examine the factors that prompt Bitcoin currency exchanges to close.

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Ian Steadman
Wired
A study of the Bitcoin exchange industry has found that 45 percent of exchanges fail, taking their users’ money with them. Those that survive are the ones that handle the most traffic — but they are also the exchanges that suffer the greatest number of cyber attacks.

Computer scientists Tyler Moore (from the Southern Methodist University, Dallas) and Nicolas Christin (of Carnegie Mellon University) found 40 exchanges on the web which offered a service of changing bitcoins into other fiat currencies or back again. Of those 40, 18 have gone out of business — 13 closing without warning, and five closing after suffering security breaches that forced them to close. Four other exchanges have suffered serious attacks but remain open.

One of those is Mt Gox, the largest Bitcoin exchange, with Moore and Christin stating that at its peak it handles more than 40,000 Bitcoin transactions a day, compared to a mean average of 1,716. It has been the victim of a huge number of distributed denial-of-service (DDoS) attacks over the past month during the peak of the Bitcoin bubble (and its subsequent bursting — though the price now appears to be rising again). Its latest statement, dealing with the attack it suffered on 21 April, is long and comprehensive, seeking to assuage the fears of Bitcoin users who feel that Mt Gox is becoming a weak chain in Bitcoin’s infrastructure.

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